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It's hard to pass up a yield of 6% these days, so it's little wonder investors have flooded into exchange-traded funds focusing on preferred stock. But many of these ETFs could end up hamstrung when rates start to rise, and can be at a distinct disadvantage to actively managed mutual funds.

Preferred stock is equity with bond-like characteristics; in the event of a bankruptcy, preferred shareholders are paid before common stock shareholders, but after bondholders. They come with high (usually quarterly) dividends—an average of 6% these days, compared with high-yield bonds' 5.1% average payout. Like bonds, they're usually issued with maturities, and the longer their duration, the more susceptible they are to changes in Federal Reserve policy and interest-rate increases.

Preferred stock also has call risk. Banks—among the biggest issuers of preferred stock—are now calling them in droves and issuing new preferreds with lower rates. As much as 15% of the total market could be called in the next six months, according to Barclays analyst Shobhit Gupta.

Plus, capital rules issued last June have encouraged banks to deliver a steady stream of fixed-rate perpetual securities. In fact, preferred securities with fixed rates accounted for 62% of new issuance last year, according to Barclays.

NOW HERE'S WHY actively managed mutual funds have an advantage over ETFs when it comes to investing in preferred stock: Index ETFs can only buy securities that are traded on an exchange—which means they're loading up on securities issued at today's low rates and from the surfeit of fixed rates. But actively managed mutual funds can buy from a wider universe of floating-rate preferreds, which reset their rates periodically and therefore suffer less when rates rise. Many floating-rate preferreds are only available in the over-the-counter market, where managers must negotiate prices with other buyers and sellers. Index ETFs simply can't participate. A full 20% of the preferred stock issued in 2012 were floating-rate preferreds unavailable to ETFs.

Preferred-stock investors looking for protection against rising rates would be better served by pricier but more nimble active mutual funds, such as the $2.2 billion
Cohen & Steers Preferred Securities and Income
(CPXAX), which shot up 22% in 2012 and yielded 5.9% in the past 12 months, or the $1.5 billion
Nuveen Preferred Securities
(NPSAX), which climbed 25% and paid out 5.8% in the past year. Both come with annual expenses of a little more than 1%, though, and upfront sales charges of 4.5% and 4.75%, respectively.